Cyprus: Offshore Business Sectors
Licencing and Franchising: Royalty Collection
A frequent feature of international trade and investment, particularly between advanced and less advanced countries, is the transfer of technology or 'brand' or intellectual property in return for licence, franchise or royalty payments. Due to its network of double-tax treaties and favourable taxation regime, Cyprus is a suitable place in which to locate an intermediary company to handle payments which might otherwise be taxed highly in the receiving country.
Such payments would normally be deductible expenses in the originating country, and under the tax treaties will be subject to low or zero withholding tax (Central and Eastern Europe, China, India, South Africa and a number of Middle Eastern countries). At worst, the income received in Cyprus will be taxed after deduction of expenses at 12.5%. See below under Financial Holding and Investment Activities for comments on the tax treatment of repatriated Cyprus profits in Western countries.